When Big buys small

In December 2015, Jennifer Lynn Bice announced that she had sold her company, Redwood Hill Farm & Creamery (which makes yogurt, kefir, and cheese) in Sebastopol, in Marin County, to Emmi. To forestall the fears of her customers and suppliers, she wrote an open letter explaining that while the decision “was a big and difficult one,” she had made it with “our entire community in mind.” Her main goal was “to ensure that, after I retire,” Redwood Hill would “continue to thrive as a Sonoma County business [and] a community resource.”

About six months after that, the beloved Cowgirl Creamery of Point Reyes Station on the Marin County coast, also sold to Emmi. The partners who had owned it, Peggy Smith and Sue Conley, had written no such letter, though they did reach out to customers, suppliers, and others, to assuage any fears. No, they weren’t leaving, they said. Yes, business would go on as usual. And yes, Emmi is big, but that doesn’t make it bad.

Nevertheless, Mother Jones, in an article published last May, characterized the deal as  Cowgirl “falling into the maw of a large company.” The short piece wasn’t altogether negative, but it was illustrated with a stock photo of graffiti depicting a large fish eating a smaller fish, and it failed to note that Emmi is a farmer-owned co-op that has a history of acquiring independent companies and then just letting them do their thing. The article was just the kind of publicity Bice had been worried about when she wrote her letter.

But such is the atmosphere in the independent-food world of NorCal that the owners of both companies felt they had to do even more. So they held a press event last week in San Francisco that included Matthias Kunz, Emmi’s executive vice president for the Americas, and a fifth person who could shed more light on the acquisitions than just about anybody—and who happened to be pals with all three other owners: Mary Keehn of Cypress Grove Chevre, located far to the north in Arcata. Her company, too, was purchased by Emmi, in 2010. In that time, she said, everything has gone as well as she had hoped. If you have to sell out, all four women insist, you could do a lot worse than Emmi.

Part of this is luck. Not every independent company will be able to find an Emmi. But part of it is hard work. In her letter, Bice noted that she had spent “years” trying to find just the right buyer, and then vetting Emmi once talks with that company began.

“We’re not serial entrepreneurs,” Keehn said in an interview. She and her three compatriots, who refer to themselves as “the sisters,” all “created something that we truly care about and that we wanted to preserve.”

Keehn’s satisfaction with how her company has been treated in the six years since the acquisition helped convince the other sisters to go with Emmi, too. “You only have one chance to sell your business,” Conley said during last week’s event. “If you sell it to the highest bidder, who do you get? Kraft?”

Keehn reiterated these points in a follow-up interview this week, noting that she took part in the publicity effort because, when she sold her company in 2010, she did receive a lot of blowback, and she wanted to help prevent her sisters from having to deal with the same. It seems to have mostly worked, save for the MoJo article.

“I was secure with the deal, but the community was not,” Keehn said. “There were articles [in local media] warning of job losses.” Some cheese-enthusiast internet commenters declared that the company, which like Redwood Hill specializes in products derived from goat’s milk, would just be an outlet for Emmi to sell imported Swiss cheese. This of course was not true. “I really wasn’t prepared for this reaction,” she says. She helped her friends because “If people don’t know the real story, they’ll make one up.”

The owners all seem to genuinely like Kunz, whom they jokingly refer to as their “corporate overlord,” and to like the company they all now work for. They had all gotten bigger offers from large companies, but rejected them because they didn’t meet the owners’ strict criteria: among other things, that there be no layoffs, and that the owners be allowed to continue running the companies as they had been. Emmi was willing to give them such written assurances. Their contracts include covenants to that effect. When Cypress Hill was purchased, about 50 people worked there. Now, the company employs about 70, Keehn said.

Part of the negative reaction, of course, comes from the fact that Emmi is not only a corporate giant (it is Switzerland’s largest dairy company, with far-flung businesses that rack up more than $3 billion in annual sales), but is also as far from local as can be.

Ideally, all the owners would prefer to have been bought out by a local company, but that just wasn’t possible. “I would love it if Emmi were from Marin County,” said Smith, of Cowgirl. “But,” she added with a shrug, “they’re from Switzerland.” One can’t have everything.

Although Emmi’s stock trades on the Zurich market, it’s 54 percent owned by small-scale dairy farmers. And it has a long history of letting its newly acquired entities maintain their image.

Which is not to say such deals aren’t fraught. They often are. And they can easily go bad. It’s sometimes the case that a big company will make all kinds of promises when it swallows up a smaller one that operates according to some set of principles—sustainability, say, or offering only organic products, or eschewing GMOs—only to break those promises somewhere down the line. That happened after Kellogg acquired Kashi in 2000, and eventually started using genetically modified soybeans in its products, much to the horror of some Kashi customers. On the other hand, a lot of people don’t even know that the ice cream brand Ben & Jerry’s is owned by a corporate behemoth, Unilever. That’s because Unilever essentially leaves its subsidiary alone. The two entities even take opposing sides on various debates, such as the one over GMOs.

For Emmi, the deals might not be hugely lucrative in the short run, but they are helping the company to stitch together a global presence in growing markets. Two of the three companies specialize in goat cheese (Cowgirl so far lives up to its name), which has become more popular in recent years. Of the six acquisitions the company has made in the past six months, four were of companies that sell products made from goat’s milk. The strategy, according to Kunz, is generally to allow acquired companies to continue growing organically (with the help of Emmi’s money, of course). “Their big value is in their roots,” he said. And while they all want to grow, they want to do so at their own pace. Smith said during the presentation last week that her 10-year plan is “pretty slow growth, probably to [Emmi’s] dismay.” This elicited a “what can you do?” shrug from Kunz.

But none of that has prompted any second-guessing. “The thought of selling my business to a foreign (entity) was really hard to wrap my head around,” said Bice. But, since she couldn’t get financing anywhere else, it turned out to be by far the best option for her to protect the future of her company. Banks, she said, had told her, “We don’t give loans for the goat business.”